Manatt appellate Senior Counsel Michael Berger authored a column for Daily Journal examining the “too big to fail” theory from the 2007-2009 financial crisis, and stressed the significance of takings cases before the U.S. Supreme Court this term.
During the last financial disaster, the federal government was convinced it had to step in to prevent a new depression, Berger explained. For automakers, like Chrysler and General Motors, the government decided that it would become the lender of last resort, believing that the failure of these auto empires would be disastrous.
“To accomplish its goal, the government decided that the corporate entity known as ‘Chrysler’ needed to be reduced in size,” Berger wrote. “So it did two things: It insisted that the manufacturing entity be sold to an Italian company called Fiat. And it demanded that 25% of the dealerships be closed. In order to avoid legal impediments, the government enacted this plan through a bankruptcy, not considering that dealerships are not owned by the automakers but by small businesses and family groups, thus taking their property.”
This was not the first time an economic crisis impelled government intervention to save a large enterprise, nor will it be the Supreme Court's first time to consider the impact of such actions, Berger concluded.
Daily Journal subscribers can read the full article here.